Investors face more geopolitical whiplash from Trump's Venezuela gamble

By Amanda Cooper, Dhara Ranasinghe and Saeed Azhar

LONDON/NEW YORK, Jan 4 (Reuters) - Global investors are facing a fresh surge in geopolitical risk after the U.S. capture of Venezuelan President Nicolas Maduro, a move that could unlock the nation's vast oil reserves and boost risky assets over the longer-term but prompt a flight to safety when trading resumes.

President Donald Trump said the U.S. would take control of the oil-producing nation, while Maduro, whom the U.S. has repeatedly accused of running a "narco-state" and rigging elections, was in a New York detention centre on Sunday awaiting charges. Washington has not made such a direct intervention in Latin America since the invasion of Panama in 1989.

"The events are a reminder that geopolitical tensions continue to dominate the headlines and drive the markets," said Marchel Alexandrovich, an economist at Saltmarsh Economics. "It is clear that the markets are having to cope with significantly more headline risk than they are accustomed to under the previous U.S. administrations."

MARKETS OFF TO STRONG 2026 START

Markets were closed when the strikes took place, but had kicked off the first trading day of the year on a strong footing, with Wall Street indexes closing in the green and the dollar rising against a basket of major currencies on Friday. 

U.S. and global stocks ended 2025 near record highs, having notched double-digit gains in a tumultuous year dominated by tariff wars, central bank policy and simmering geopolitical tensions.

Mohamed El-Erian, a former chief executive of bond fund giant PIMCO, said in a post on X that the economic and financial reaction to Maduro's toppling was unclear.

"We would have probably seen an immediate decoupling of oil prices (lower on the prospect of increased Venezuelan exports, depending on the leadership succession there) from gold (higher due to safe haven flows amid heightened uncertainty," had markets been open, he wrote.

Gold rose the most in 46 years to record highs last year, driven by a cocktail of factors including U.S. rate cuts and geopolitical flashpoints.

Trump said at a press conference on Saturday that the United States would "run the country until such time as we can do a safe, proper and judicious transition." He provided little detail on how this would work, but said he was not afraid of sending in the U.S. military. 

NO QUICK FIX FOR VENEZUELA'S OIL

Just hours after capturing the Venezuelan leader, Trump said American oil companies were prepared to spend billions to restore Venezuela's crude production, something that could give global growth a lift as greater supply lowers energy prices.

The oil price edged above $62 a barrel in December, when the U.S. blocked sanctioned tankers from entering or leaving Venezuela, but has been fairly stable at around $60-$61 since. 

"From an investing perspective, this could unlock massive quantities of oil reserves over time," Brian Jacobsen, chief economic strategist at Annex Wealth Management, said. "Markets sometimes swing into risk-off mode on expectations of conflict, but once the conflict starts, they rotate quickly to risk-on."

Still, most strategists agree it could take years to meaningfully boost Venezuelan output, which has plummeted over the past decades due to mismanagement and a lack of investment from foreign companies after the government nationalised oil operations in the 2000s, including the assets of Exxon Mobil XOM.N and ConocoPhillips COP.N.

Any companies that might want to invest there would need to deal with security concerns, dilapidated infrastructure, questions about the legality of the U.S. operation to snatch Maduro and the potential for long-term political instability, analysts told Reuters.

'POLITICAL STABILITY AND CONSIDERABLE INVESTMENT'

Stephen Dover, who is chief market strategist and head of Franklin Templeton Institute at Franklin Templeton, said in a LinkedIn post the U.S. administration has shown it is willing to act unilaterally and use force, which could reinforce the trend of countries spending more on their own national security.

He said it will also likely add to the uncertainty of the dollar’s role as a safe haven "while raising further questions about deterioration of international institutional pillars." 

Over the longer run, a more stable, productive and prosperous Venezuela could offer the world significant supplies of oil, he said. 

"That would be significant for global growth, but it will take political stability and considerable investment to unlock that potential."

(Additional reporting by Davide Barbuscia and Megan Davies in New York, Gregor Hunter Stuart in Singapore; Editing by Elisa Martinuzzi and Christina Fincher)